Suppose you work in a company that has Superior Customer Service as one of its Core Values, Best-In-Class Customer Service as one of its key Strategic Objectives, and a company metric related to something like “90% or above customer satisfaction rating”. It would be hard to deny that this company is all about the customer and sees superior customer service as a distinct competitive advantage, which in turn drives company performance (revenues and profits). Suppose they also invest more than their competitors in customer service training for their staff. Another indicator that this company believes that improved customer service leads to improved business performance.
Plus, at every meeting and town hall the leaders of the company talk about the importance of customer service, listening to customer feedback, acting on customer feedback, and developing ever more ways to improve service and satisfaction levels.
Great! Most of us would say the company is serious about customer service. And indeed they are, until . . .
I have had the opportunity to both observe and consult with companies such as the one above and mostly they “walk the talk”. And I said mostly, because I have also seen how these very same companies behave, or should I say how the leadership team behaves, when revenue forecasts are declining and/or profit margins are falling.
They decide to cut staff. Some call it various business names, such as headcount reduction, right-sizing for a shrinking business, or “adjusting to the realities of the business”.
(I am not talking about those big economic events like 911 or the global financial meltdown of 2008-2009. These hit all industries and all companies with the same reality of a significant drop in consumer confidence and global spending patterns. In those few instances, where the very survival of the company and the industry is at stake, severe cost reduction is a necessity to stay in business. I am referring to the far more frequent event where one company sees a forecast decline coming in their business.)
So, they eliminate staff and the payroll and other costs associated with those staff. Some do it with an across the board 10% (or whatever the number) reduction in all departments. Others are more thoughtful and try to eliminate low performers at any level. Many reduce travel and entertainment budgets to reduce costs. Some put a hiring freeze for a period of time. Some cancel or significantly reduce trade show activities or R&D expenses. All designed to help get costs back in line with revenues, based on pre-determined margin requirements set out earlier in the yearly planning cycle.
A Different Approach:
But suppose the leadership team really did believe that customer service was a direct driver of revenue and profit? Suppose the company culture was aligned with the strategy of superior customer service? Would they react differently to a business downturn? Some might still reduce headcount to get profits and costs back in line with revenues. But those who really believe in the direct link between service and business performance might do things differently.
What about a serious exercise in seeking customer input into why growth is slowing? And really listening. What about increasing the number of well-trained customer service personnel in the field? What about investing in product or service innovations? What about a value chain analysis in either service or manufacturing to see where the waste (excess time and related costs) really are? There are all the things good leadership teams think about when trying to improve customer service and satisfaction. However, during a downturn, most of these are forgotten and all activity turns to reducing immediate costs.
Several recent studies in numerous industries have shown that increases in customer service and satisfaction have a direct positive and measurable impact on revenues and profit margins through greater customer retention and loyalty, additional purchases, positive talk with friends which brings in new customers, more frequent store visits, even being willing to pay a little more for the product than that store down the street that gives lousy service. Good service also reduces internal staff turnover and supports greater employee engagement.
If you really want to see some facts and statistics about the impact of customer service, here is a good overview article on the impact of good and bad customer service.
I have learned to watch what leadership teams do more than what they say or print in their company newsletters or annual reports.
Leadership behaviour reveals the real culture far better than any culture survey!
Organizations are shadows of their leaders; that’s the good news and the bad news!
Written and Posted by: John R. Childress
Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid
John also writes thriller novels!